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Robert Stavins Puts Proposed Carbon Plan into Perspective

June 2, 2014

By Jenny Li Fowler, HKS Communications

The Obama administration has announced one of the most ambitious plans to fight climate change taken by the U.S. government. The proposed Environmental Protection Agency regulation aims to cut carbon pollution 30 percent from 2005 levels by 2030. Robert N. Stavins, Albert Pratt Professor of Business and Government, explains what the plan entails, and the obstacles it faces.

Q:What are the key components of the carbon plan announced by the administration today?Stavins:The regulatory (rule) proposal calls for cutting carbon dioxide (CO2) emissions from the electric power generation sector by 30 percent below 2005 levels by 2030. Electricity generation is responsible for about 38 percent of U.S. CO2 emissions, and about 32 percent of U.S. greenhouse gas (GHG) emissions.
Through a carefully designed formula, the proposal specifies specific targets for each state. States are given very broad flexibility for how to meet their targets, including increasing the efficiency of fossil-fuel power plants, switching electricity dispatch from coal-fired generating plants to natural gas-fired generating plants, developing new low-emissions generation (such as new natural gas combined cycle plants, more renewable sources – wind and solar, nuclear, and coal with carbon capture and storage), and more efficient end-use of electricity.
States are also given flexibility to employ a wide variety of policy instruments, including market-based trading systems; and states can work together to submit multi-state plans, if they like.
The proposed regulation will be finalized after receipt of comments one year from now (June 30, 2015), then states will have until July 2016 to submit their plans, and can then request one-year extension requests (two-year requests for multi-state plans). The compliance period commences in 2020.Q: Do you feel this plan goes far enough to combat the threats posed by greenhouse gas emissions?Stavins:The proposed policy will be less effective environmentally and less cost-effective economically than the economy-wide Waxman-Markey bill would have been, but given political polarization in Washington and the inability of Congress to approve that more comprehensive and more cost-effective approach, this is the best the administration could do.
Together with the motor vehicle fuel efficiency standards already announced, this is a step in the right direction.Q: What has been the response from industry and environmentalists?Stavins:I anticipate that the major environmental advocacy groups will be very supportive of this proposed rule.
Some electricity-sector CEOs have also been supportive, because of the flexibility it provides, including the ability to utilize cap-and-trade systems.
The coal industry is strongly opposed, as are various trade associations, including the U.S. Chamber of Commerce.Q:What needs to go right for this plan to succeed?Stavins:There will be a significant number of important lawsuits filed by states that will argue that EPA has exceeded its legal authority with this proposal.
Needless to say, for the plan to succeed it must survive those legal challenges, which will be working their way through the courts over several years. In addition, a significant change in the senate majority and in the party holding power after the next presidential election could result in progress being slowed to a crawl, if not the abandonment of the approach proposed by the current administration.

Robert N. Stavins, Albert Pratt Professor of Business and GovernmentPhoto Credit: Martha Stewart

"The proposed policy will be less effective environmentally and less cost-effective economically than the economy-wide Waxman-Markey bill would have been, but given political polarization in Washington...this is the best the administration could do."